Róisín Shortall (Dublin North West, Labour)

I thank Senator Barrett for engaging on this Bill. The Government cannot accept his two amendments. The Central Bank is the Financial Regulator for prudential and solvency purposes. Typically, insurers must satisfy various prudential requirements that are appropriate to the Central Bank. These are requirements that apply generally to all insurance and financial services companies and relate to matters such as their financial operation and investment policies. Currently, the Central Bank is the Financial Regulator in respect of Aviva Health and Quinn Health Care. The VHI is not currently financially regulated by the Central Bank of Ireland.

As the House was aware, on 29 September last, the European Court of Justice ruled against Ireland in regard to a derogation exempting the VHI from the requirement to be authorised by the Central Bank. It found that the State had failed to apply EU law relating to non-life insurance equally to all insurance undertakings. The effect of this decision is that VHI can no longer benefit from this derogation. The Government is considering the next steps in this regard, and decisions will be made shortly.

The proposal to merge the HIA and the Central Bank has been considered previously. This proposal requires careful examination, particularly in regard to how such a step would fit in with the programme for Government commitment to move to a system of universal health insurance. Under the programme, it is intended to establish a health insurance fund that would have both regulatory functions and payment or funding functions. In this context, it may seem more appropriate to transfer the functions of the HIA to the hospital insurance fund where the regulation of insurers would lie rather than placing it with the Central Bank as Financial Regulator. These matters will be considered by the Government as proposals for universal health insurance are developed.

The judgment to which Senator Barrett referred did not propose moving the HIA to the Central Bank. There is some confusion in this regard. The Senator may be confusing prudential supervision with the risk equalisation scheme, which is very different. If, as Senator Barrett claims, the VHI is so protected, what does he have to say about the super-normal profits that were enjoyed by Bupa and the very significant profits enjoyed recently by Aviva? One should compare their circumstances with those of the VHI. If Bupa's customers had an average age of 38 years, this was very much outweighed by the proportion of older persons in the VHI and their relatively less-healthy profile. The damages case is to come before the court in January. Bupa left the market before it won its case and, it must be stated, after making very substantial profits.

The interim scheme does not nearly cover all additional costs that the VHI incurs in paying for claims of older, less-healthy customers. I pointed that out in my speech earlier. Does the Senator realise that the VHI has 80% of claim costs but less than 60% of the market share and, as a consequence, premium income?

There is much competition in the market but, as I stated, it relates to younger, healthier customers. There is undoubtedly an issue arising at present because of companies cherry-picking. They will continue to do so. This is very much the reason we need to ensure we have a risk equalisation scheme in place to cover us next year. That will allow us the time to develop a more comprehensive scheme thereafter.